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No tax, no transfers
No tax, no transfers
Saturday, 13th Jun 2009 07:27

The Football League have decided to introduce new rules where clubs not paying their tax bills will not be able to operate in the transfer market.

In a bid to try and prevent the financial misery suffered by clubs, the Football League at their Annual General Meeting in the holiday resort of Portugal have passed a new rule that they believe should prevent clubs reaching the sort of level of debts that has seen points deductions a plenty over the past couple of seasons.

Clubs have voted that teams that build up high levels of debt to the Her Majesty's Revenue and Customs will face a transfer embargo and will not be allowed to sign new players until that debt is erased. It is hoped this will bring financial responsibility to clubs and act as an early warning system to highlight mismanaged clubs.

In recent years, it has become almost impossible for a club to leave administration via a CVA primarily due to the levels of debt to the HMRC and as such have found themselves with an additional points penalty, as Luton, Bournemouth and Rotherham did last season. To comply with FL rules, a club leaving administration must do so with a CVA that 75% of creditors must agree to - put simply, the CVA is an offer of repayment to those owed money to be paid back at x pence in the pound over a number of years.

"Footballing debts" were always exempt from this and had to be repaid in full to avoid a domino effect taking place where once club's financial problems would then impact on other clubs. This is still the case, but the HMRC objected to this preferential treatment being offered to football people and not themselves, and subsequently voted against each CVA. This meant clubs were unable to leave administration with this agreement, and hence were given a further penalty by the Football League. The HMRC debts were responsible for more than 25% of a club's debts, meaning the HMRC had the power to vote down any possible CVA.

The new rules will create a system which should prevent this situation happening, as it will practically enforce clubs to pay their tax debts as and when they should be paid, rather than allowed to run up big bills that they later find themselves unable to pay off. The HMRC seem pretty happy with the new regulations, and the rules should at the very least see mismanaged clubs facing a penalty which impacts on the field. Thought 10p in the pound to the first set of supporters to complain that the fans are the ones being punished.

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